Authors: Noel D. Uri
Addresses: Competitive Pricing Division (Rm 5-A207), Common Carrier Bureau, Federal Communications Division, 445 12th Street, SW, Washington, DC 20554, USA
Abstract: Incentive regulation is now an important regulatory tool in the telecommunications industry in the USA. The issue explored here is whether incentive regulation has resulted in an increase in productive efficiency. After providing an overview of the nature of incentive regulation, one methodology for measuring its effects on productive efficiency is reviewed. This methodology is data envelopment analysis (DEA) and allows for the measurement of both scale efficiency and technical efficiency of individual local exchange carriers. The results indicate that most local exchange carriers were technically efficient over the 1988-1998 period. Four LECs, however, consistently demonstrate scale inefficiency. In the aggregate, however, based on the DEA results there was no identifiable improvement in aggregate LECs| technical efficiency between 1988 and 1998. Subsequently, an alternative methodology, a stochastic frontier production function approach, is considered. The results from this methodology confirm that there was no change in technical efficiency over the period of study, something that incentive regulation was specifically designed to enhance.
Keywords: data envelopment analysis; incentive regulation; production; telecommunications.
International Journal of Services Technology and Management, 2002 Vol.3 No.4, pp.441-462
Available online: 13 Aug 2003 *Full-text access for editors Access for subscribers Purchase this article Comment on this article